Dollar Up Against Swiss Franc and Yen, Flat Against Euro

The dollar gained on the Swiss franc on Thursday and approached a 4-1/2-year high against the yen as investors continued to punish low-yielding currencies in a quest for higher returns.

Against the euro, the greenback was little changed, giving up earlier gains made in the wake of the highest reading of growth on a regional U.S. economic indicator since April 2005.

The day's biggest gainers were the Australian and New Zealand dollars, which have benefited as strong global economic growth has driven demand for the commodity exports of both countries, putting upward pressure on their interest rates.

"We're seeing the dollar gain against low yielders like the yen, but this is not really a dollar story - it's about strong global growth and demand for high-yielding commodity currencies," said Adnan Akant, head of foreign exchange at the money manager Fischer Francis Trees & Watts.

The dollar was up against the yen after rising to 123.75 yen earlier, not far from a fresh 4-1/2-year high. Against the Swiss franc, the lowest yielding major currency in the world after the yen, the dollar was up 0.35 percent at 1.2415 francs . The Australian dollar was up 0.4 percent at US$0.8465, while the New Zealand dollar rose as high as $0.7660, its highest since being floated in 1985.

Attempts by New Zealand's central bank to intervene in the market this month have failed to limit the kiwi's gains, as investors flock to the highest interest rates in the industrialized world, of 8 percent.

The euro was trapped in an unusally narrow range for the fourth straight session against the dollar, trading down slightly on the day at $1.3585. An unexpectedly large gain in Philadelphia area factory output in June provided a momentary boost to the dollar, which has closely tracked bond yields in recent weeks, but the greenback eased as U.S. Treasury yields failed to hold gains.

Some analysts said fears of trouble related to subprime mortgage investments by two hedge funds managed by Bear Stearns were pushing investors out of risky assets and into short-dated Treasuries.